Warehouse rents in Hong Kong to dip to 4%

That's within the next 12 months.

According to Colliers International, in 2013, Hong Kong’s industrial property market faced uncertainties due to the slowdown in re-exports. Following weakening performance in late 2012, the three-month moving average of re-export volume decreased from 7.8% year-on-year (YoY) in 4Q 2012 to 5.1% YoY in 1Q 2013, according to the government’s statistics. 

“Despite the challenging external environment clouding the re-exports, the continued local price inflation and increasing tourist arrivals sustained retail sales growth in 1Q 2013, which consequently supported the demand for the local logistics distribution,” says Simon Lo, Executive Director of Research & Advisory, Asia at Colliers International.

In addition to the solid demand, a lack of stock for leasing underpinned the continued rental growth of quality warehouses in Hong Kong. In 1Q 2013, warehousing rents increased by an average of 5% quarter-on-quarter (QoQ), a similar growth rate to that of the past two years.

Lo points that the prevailing undersupply situation is exacerbated by the fact that virtually no new warehousing stock has been added during the past 10 years. Although the development at the two logistics sites in Tsing Yi that were sold to two individual developers in 2010 and 2012 will be the upcoming new supplies in the market, their developers are likely to hold most of the spaces for their own use. In other words, the completion of these two developments will only provide limited stock available for lease in the open market.

Looking forward, the local warehousing rents continue to benefit from the tight supply environment and the expected growth of re-exports and retail sales. However, in anticipation of a slowdown in both retail sales and re-exports volume, warehousing rental growth is projected to drop to 4% over the next 

On the investment front, the government statistics showed that the average investment yield of industrial properties fell further to an all-time-low of 2.7% in February 2013.